Core content:
Central economic work conference and Central Political Bureau meeting: stability is the overall situation. The Political Bureau meeting and central economic work conference have the same caliber. The economy is facing difficulties in 2022, and stability is the most important task. The fiscal policy is to advance expenditure, increase intensity, reduce taxes and fees, and moderately increase leverage. Monetary policy is also more active. Monetary policy ensures that the total amount of money is slightly loose by increasing the investment of social financing and improving the M2 level, and guides the capital price downward. Based on this, the RRR reduction can still be expected in the first half of 2022, and the possibility of interest rate reduction is upward.
On December 6, 2021, the central bank announced that it would reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on December 15, 2021. The RRR reduction is mainly to: (1) the economic downturn is obvious, and the RRR reduction needs to hedge the economic downturn; (2) the RRR reduction also improves the stable source of funds of commercial banks and promotes the transformation of economic structure; (3) promote the reduction of social comprehensive financing costs and hedge MLF.
The interest rate of agricultural and small-scale refinancing has been lowered, and the structural monetary policy tools have made great efforts. After the announcement of a comprehensive RRR reduction on December 6, the people’s Bank of China decided to reduce the interest rate of agricultural and small-scale refinancing to financial institutions by 25bps on December 7. The purpose of this interest rate reduction is not only to further save costs for banks, but also to make structural adjustments following the RRR reduction to be launched on December 15.
The central bank raised the foreign exchange reserve ratio twice during the year. On December 9, the central bank announced that it would raise the foreign exchange reserve ratio of financial institutions by 2 percentage points from December 15, 2021. Raising the foreign exchange reserve is the central bank’s attitude towards RMB appreciation. At present, the export is still strong, while the deficit of the service industry is reduced, and the foreign exchange settlement of billion yuan at the end of the year is relatively strong. The Fed may accelerate the taper and the interest rate hike schedule, which will strengthen the US dollar. The two opposite forces may make the RMB exchange rate fall again in the future.
The market interest rate has been differentiated, and the reverse repurchase operation is stable. The net return of 180 billion yuan in the open market last week. Although the funds are tight at the end of the year, the upcoming RRR reduction on the 15th ensures sufficient liquidity. Money market interest rates were kept stable under the care of central bank funds, and the overall level of interest rates fell compared with last week.
Prices fell slightly. Last week, prices fell slightly, pork prices fell, and vegetable prices fell. The weather has also warmed up, and the price of vegetables has fallen. Pork prices fell temporarily. China’s price pressure has weakened.
Demand and supply were sluggish at the same time, waiting for steady growth measures, the market’s concern about Omicron cooled, and the crude oil price ended its six consecutive falls. The poor progress of the US Iraq negotiations also supported oil prices. The operating rate of blast furnace declined, and the production capacity was low before the Winter Olympic Games. Steel inventory decreased, but the decline rate was slow, and downstream production did not rise significantly. At the national coal fair, the benchmark price of thermal coal long-term association was clearly adjusted, which further showed the government’s determination to regulate coal price, so thermal coal fell significantly. At the same time of supply and demand, black products are waiting for steady growth measures.
